Goldman Sachs (NYSE:GS) has predicted the US Federal Reserve will be forced to curb its plans to raise interest rates due to the fallout from the collapse of Silicon Valley Bank (SVB).
US regulators stepped in on Friday to shore up the beleaguered bank and guarantee deposits up to US$250,000, though there is still uncertainty over what happens to larger deposits and other creditors.
Analysts at Goldman expect the Fed will now postpone a rate hike expected for 22 March because of concerns about the impact of SVB's failure on other banks.
Previously, the Wall Street giant had forecast US interest rates would rise by 25 basis points (0.25%) in March and though it still expects 25-basis-point hikes in May, June and July even this was no longer certain, it added.
Goldman said it now expects US interest rates to peak at between 5.25%-5.5%.
SVB's customers should have access to their deposits from today, regulators said at the weekend, with a new facility set up to give banks access to emergency funds.
The Federal Reserve has also agreed to make funding available to banks in emergency cases.
This injection of liquidity should be sufficient to “provide substantial liquidity to banks facing deposit outflows and to improve confidence among depositors”, said Goldman.